Quick-commerce firm Zepto raises $665 mn in funding, valued at $3.6 bn

Series F round comes as Mumbai-based startup aims to become profitable before launching IPO

Zepto said on Friday it has raised $665 million in a funding round that doubled its valuation to $3.6 billion and marks one of the largest financing in quick commerce this year. 

The Series F round was co-led by existing investors StepStone Group, Nexus Venture Partners, Glade Brook Capital, Goodwater, and Lachy Groom. New investors Avenir Growth, Lightspeed Venture Partners, and Avra also joined.

The funding comes as Zepto preps for an initial public offering (IPO) in 12-15 months and aims to turn profitable before listing. "We are in a pretty healthy place even with the cash we have in the bank. We look at this funding round more as a pre-IPO financing to build our balance sheet ahead of our upcoming IPO. Having this cash enables us to launch an IPO of meaningful scale," said Aadit Palicha, co-founder and chief executive officer of Zepto.

 

Zepto’s gross merchandise value (GMV) has multiplied year-on-year to over $1 billion, and around 75 per cent of the company’s stores are fully ebitda positive as of May 2024. Palicha said the stores take six months to achieve profitability from 23 months earlier.

“This dynamic of stores turning profitable faster has enabled Zepto to grow rapidly while achieving near ebitda positivity at a company level. We plan to continue operating with fiscal discipline as we scale from 350 stores to 700 stores by reinvesting the capital generated from mature stores back into the business,” said Palicha, referring to earnings before interest, taxes, depreciation, and amortisation.

Zepto runs some 350 dark stores – a retail distribution centre or outlet that serves exclusively to online shopping – in top 10 cities and plans to expand into another ten.

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This latest round of investors pouring funds shows the interest in the quick commerce segment, which till recently was considered to be a cash burn excercise. Recently, Zomato announced that it will be investing Rs 300 crore in its quick commerce business Blinkit as the firm decides to expand its dark stores to 1,000 by the end of FY25. At present it has 526 dark stores. There have been reports that Flipkart willmake its foray into quick commerce space soon, along with retail giant Reliance' JioMart.

This is Zepto's second significant fundraise in 10 months. In August, Zepto raised $235 million in a Series E funding round at a $1.4 billion valuation to become a unicorn, ending an extended dry spell. The round was led by the StepStone Group, a Baltimore-based institutional asset manager, which is also a limited partner (LP) of Nexus Venture Partners.

Zepto had previously raised $60 million in October 2021. That year in  December, the Y Combinator-backed startup raised another $100 million at a $900 million valuation, before raising another $200 million in May 2022.

“The most exciting part about this next phase of Zepto’s journey is the major new projects that will 10X customer experience, from launching new categories to expanding initiatives like Zepto Pass. To build out this roadmap, we plan to hire top talent across engineering, product, growth, finance, operations, and category management,” said Kaivalya Vohra, co-founder and chief technology officer of Zepto.

The Series F fundraise comes at a time when Indian startups are recovering from a so-called funding winter. The quantum of funding has remained flat at $3.9 billion in the first five months of this year and has not dropped as much as it did in the past few years, ‘Business Standard’ reported earlier.

Zepto, which exclusively focuses on quick commerce, competes with Zomato-owned Blinkit, Swiggy Instamart, and Tata-owned Big Basket.

The Mumbai-based firm has been steadily increasing its market share in the quick commerce space. While Blinkit remains the market leader with a 40 per cent share, Zepto's market share has risen from 15 per cent in March 2022 to 22 per cent in January 2024, according to a recent report by HSBC Global.

Meanwhile, Instamart's share has fallen from 52 per cent in March 2022 to 32 per cent in January 2024, the report stated.

Zepto’s revenue from operations increased 14-fold to Rs 2,024 crore in FY23 compared to Rs 140.7 crore in the previous year. The startup’s losses widened threefold to Rs 1,272 crore for the period, as against Rs 390.3 crore a year ago, according to filings with the Ministry of Corporate Affairs.